Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

On January 1, 2021, Quachita Airlines issued $400,000 of its 20-year, 8% bonds. The bonds were priced to yield 10%. Interest is payable semiannually on

On January 1, 2021, Quachita Airlines issued $400,000 of its 20-year, 8% bonds. The bonds were priced to yield 10%. Interest is payable semiannually on June 30 and December 31. Ouachita Airlines records interest at the effective rate and elected the option to report these bonds at their fair value. On December 31, 2021, the fair value of the bonds was $335,000 as determined by their fair value in the over-the-counter market. None of the change in fair value was due to a change in the general (risk-free) rate of interest.

Required: (please show journal entries, too many words makes it confusing)

1. Determine the price of the bonds at January 1, 2021, and prepare the journal entry to record their issuance.

2. Prepare the journal entry to record interest on June 30, 2021 (the first interest payment).

3. Prepare the journal entry to record interest on December 31, 2021 (the second interest payment).

4. Prepare the journal entry to adjust the bonds to their fair value for presentation in the December 31, 2021, balance sheet.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Managerial Accounting

Authors: Carl L. Moore

5th Edition

0538019409, 978-0538019408

More Books

Students also viewed these Accounting questions

Question

Are new members about to enter the group?

Answered: 1 week ago